PV manufacturing capacity expansion announcements collapse in Q3 2017

After the significant upwards revisions made to global solar PV manufacturing capacity expansion announcements in the first half of 2017, which we reviewed in a previous blog, the third quarter was characterised by much more tempered plans. The ‘Silicon Module Super League’ (SMSL) continued to execute on previously announced plans with some adjustments, while others in emerging markets such as Turkey and India retained grandiose nameplate targets but initial ramps remained small.

July review

The month of July proved to be the most active for new capacity expansion announcements in the third quarter of 2017. Total plans reached 3,001MW, which included 1,000MW of new solar cell capacity, a total of 2,000MW of dedicated module assembly and a nominal 1MW of advanced integrated manufacturing 4.0 R&D facility in California, opened by SunPower Corp.

Turkish solar company Smart Energy Group was reported to have established a Joint Venture with China-based Phono Solar (part of SUMEC) to build and operate an initial 400MW module assembly plant with future plans said to take capacity to 1,200MW. The assembly plant would be established the Gebze Organized Industrial Zone (GOIZ).

Also of note in July was plans by India-based Premier Solar Systems to build a 1,000MW solar cell plant with an overseas business partner. The company had also announced that it had opened a 200MW fully automated solar module manufacturing facility in Sangareddy, Telangana, India. The module assembly expansion takes nameplate module capacity to 375MW. The company has 50MW of solar cell capacity.

August review

The weakest month for capacity announcements in the third quarter was August with only one verified announcement. India-based Heavy Engineering Corporation announced plans to build a 150MW integrated cell and module assembly plant using both monocrystalline and multicrystalline wafers. Initially, the plant will have a nameplate capacity of 150MW. Modules will be used initially for its in-house downstream PV power plant projects.

There were no dedicated cell or module assembly plant announcements in August and none for thin film.

September review

New announcements rebounded slightly in September. Total new capacity plans were around 900MW, which were dominated by China-based PV module manufacturer Sunport Power, which had officially started production at a 1GW module assembly plant using Eurotron’s MWT equipment for back-contact PV modules that reduce cell-to-module losses and boost module performance. The company had initially deployed a 200MW line so the new expansion accounted for 800MW of the total in September.

Also included in September was the first fully-automated and unmanned 100MW monocrystalline solar cell line officially opened by Tongwei Group in Hefei, China as part of its most recent 2,000MW new solar cell plant.

Quarterly review

Total third quarter 2017 capacity expansion announcements reached only around 4,122MW, compared to 28,000MW in the previous quarter.

The subdued environment was driven by dedicated module assembly plans, which totalled 2,870MW, while integrated cell and module plans, absent so far in 2017, totalled 151MW. No new thin film expansion plans were announced in the third quarter.

India review

With a history of solar manufacturing, albeit small scale, India has held the promise of becoming a major power house for solar manufacturing, second only to China.

With a downstream PV market in the 6GW range in 2017 and promise of much higher installation rates through 2022, the gap between capacity expansion announcements and effective nameplate capacity continues to be the one of the widest.

Indian government data released in the second quarter of 2017 put solar cell capacity in India at just 3,164 MW, yet only 1,667MW as deemed to be operational. A similar situation existed with module assembly capacity. A total of around 8,400MW of capacity had existed in the country, while only around 5,500MW was deemed to be operational.

As seen in the chart below 2017 has seen a significant reduction in new announcements compared to the last two years with 2016 peaking at over 17,000MW. In total we have tracked over 27,800MW of announcements in India since 2014.

Challenges in building a manufacturing supply chain base in India that even comes close to meeting domestic demand has proved elusive. A key perennial challenge has been the capital markets but much of the projects tracked were JV’s with China-based companies as well as plans from US and Japan, which have also stalled despite the ability to tap low-cost finance in those countries.

A key emerging challenge that has been cited for the manufacturing plans being stalled is related to the low prices tendered on multi gigawatts of downstream power plant projects. Simply put, the winning bids are lower than potential manufacturing costs in India, not least due to the lack of a highly efficient low-cost manufacturing supply chain in the country that could match that of China.

Having depended on low cost modules produced in China, India is challenged to compete and JV’s with major Chinese producers such as Trina Solar and LONGi Group remain suspended.

However, new efforts by the Indian government to support domestic content requirements at the manufacturing sector through a new wave of government led downstream projects, could become the catalyst required to kick start more effective capacity in India. Uncertainties in trade cases in the US could also make India attractive to supply modules to the US market in 2018 onwards. However, further reforms, a complete and low-cost manufacturing supply chain, coupled to rational tendering all need to be in alignment before the imbalance between capacity expansion announcements and effective capacity is closed.

Solar manufacturing 4.0

Although the third quarter of 2017 was subdued for capacity expansion plans, it has signalled an important milestone in PV manufacturing. Several facilities were opened in the quarter that relate to the concept of Manufacturing 4.0, which includes fully automated manufacturing lines and operated remotely.

In July, Silicon Module Super League’ (SMSL) member GCL System Integrated Technology (GCL-SI) announced the establishment and operation of a module assembly workshop that was completely unmanned to test intelligent fully automated manufacturing tools and software systems. The workshop is expected to undertake tests for around two years.

The company noted that it was cooperating closely with Chinese domestic equipment manufacturers, and has independently developed and researched and developed a series of intelligent equipment and systems, which included high-speed automated tabbing machine a high-precision layout machine and robot palletizing system, In all, GCL-SI said that 26 separate systems so far developed were industry firsts.

A key aim of the tests is to achieve a 50% improvement in efficiency, a 60% reduction in online manpower and reduced processing costs by 30%. Product quality improvement targets were being set at a 21% overall improvement. The intention is to implement the improvements across its volume manufacturing operations.

In August, SunPower Corp said it had invested around US$25 million in the last 12-months on a new US R&D and pilot line facility located at its headquarters in San Jose, California.

SunPower noted that the new facility included several high-volume production-sized manufacturing tools and high levels of automation, and specialized testing equipment, designed to support its next-generation of high-efficiency N-type monocrystalline IBC (Interdigitated Back Contact) solar cells and modules, which are being designed with greater emphasis on lower cost manufacturing.

According to SunPower, over 30 parts suppliers and equipment manufacturers located in the US supplied the facility, which is housing over 100 SunPower engineers and support staff.

In September, as already noted, Tongwei Group opened its completed high-efficiency solar cell plant (S2), which included the world’s first technically unmanned 100MW monocrystalline solar cell production line under the intelligent manufacturing term, 4.0.

The S2 plant in Chengdu, China has an initial nameplate capacity of 2GW, which brings Tongwei’s monocrystalline cell capacity to around 3.4GW. The company also has around 2GW of multicrystalline solar cell capacity. The company also has around 2GW of multicrystalline solar cell capacity and recently completed a 5,000MT polysilicon plant expansion, bringing nameplate production capacity to 20,000MT.

Tongwei is investing around RMB 12 billion (US$1.8 billion) in total constructing new cell manufacturing facilities at Hefei Solar’s facilities in the Hefei High-tech Industrial Development Zone in Chengdu City to provide nameplate capacity of 10GW, while a further 10GW of capacity will be housed in the Southwest Airport Economic Development Zone of Shuangliu District, Chengdu City. Construction on the new projects is expected to start in November, 2017 and production ramped in phases over the next three to five years.

Tongwei has taken the early lead in China in investing in Manufacturing 4.0 capabilities, however much is being done behind the scenes at other major manufacturers and the learning curve is expected to take several years.

SMSL Q3 manufacturing update

JinkoSolar

Leading SMSL member JinkoSolar reported that its in-house annual silicon wafer capacity stood at 7GW at the end of the third quarter, up 1GW from the prior quarter.

Solar cell capacity as expected was 4.5GW, while module capacity did increase by a further 500MW in the third quarter, reaching 8GW. These are the expected nameplate capacities exiting 2017. Although the company claimed its next wave of expansions had yet to be determined and would be based on market demand dynamics it is highly likely new plans will be announced in the next two quarters.

JinkoSolar is expecting to hit record shipments in 2017, having guided just short of 10GW, indicate almost a 10% global market share of module shipments and is sold out through the first half of 2018

Canadian Solar

SMSL member Canadian Solar has made four revisions to capacity expansion plans in 2017 and has also provided initial new expansion plans for 2018.

The SMSL member noted that it had completed the ramp up of a new multicrystalline silicon ingot casting workshop at Baotou, China at the end of the third quarter of 2017, with a total annual capacity of 1,100MW, which included capacity relocated from its plant in Luoyang, China.

The company noted that it expected debottlenecking to push capacity to 1,200MW by the end of 2017, which is in line with the last two updated plans.

Canadian Solar said that it had plans further increase its ingot capacity to 1,720 MW by June 30, 2018, and may expand to 2,500MW if market conditions justify.

Wafer manufacturing capacity had reached 3GW in the third quarter of 2017. The company had previously guided that it expected wafer capacity to reach 4GW at the end the year.

However, Canadian Solar noted that its shift to diamond wire-saw technology, which is compatible with the Company’s proprietary and highly efficient Onyx black silicon multi-crystalline solar cell technology, helped to significantly offset the recent impact of polysilicon price increases that impact margins and so was planning to add a further 1GW of wafer production to end the year at 5GW.

The company said that its solar cell manufacturing capacity reached 4.7GW at the end of the third quarter of 2017, which was the target in its third revision to its capacity expansion plans.

However, Canadian Solar said that it planned to add additional cell manufacturing capacity at its Funing and South East Asia plants by year end, bringing 2017 cell nameplate capacity to 5,450MW, a 750MW increase.

Subject to market conditions the SMSL said it planned to add another 1.5GW of cell capacity in 2018 to reach approximately 7GW by the end of 2018.

With respect to PV module manufacturing capacity, Canadian Solar is adding almost 1GW of nameplate capacity more than its third revision made in the second quarter of 2017, which would have led to a 2017 capacity of 7,190MW.

The company expects that its total worldwide module capacity would exceed 8,110MW by the end of 2017.

Subject to market conditions again, the SMSL member said it planned to add another 1,250MW of module capacity by the end of 2018, bringing nameplate capacity to 10.3GW. Canadian Solar is the first manufacturer to guide nameplate module capacity to reach over 10GW.

JA Solar

SMSL member JA Solar confirmed that it expected to achieve both cell and module nameplate capacities of around 7,000MW by the end if 2017. JA Solar is on track to achieve full-year module shipments in the region of 6.8GW in 2017, but did not provide an update on 2018 capacity expansion plans.

Hanwha Q CELLS

SMSL member Hanwha Q CELLS said that it was starting to migrate solar cell capacity at its China-based facilities to PERC (Pasivated Emitter Rear Cell) technology, highlighting the shift away from standard BSF (Back Side Field) technology for higher conversion efficiencies.

Hanwha Q CELLS noted in its third quarter earnings call that capital expenditure was being focused in its manufacturing facilities in China to enable the company to have PERC cell production capacity of 1.4GW, while retaining around 1.2GW of BSF production. Hanwha’s lead manufacturing facilities are in Malaysia and are already 100% PERC.

Its affiliate, Hanwha Q CELLS Korea is currently adding 1.6GW of cell and module production, which is expected to provide a nameplate capacity of 3.7GW by the end of this year.

Hanwha Q CELLS in-house cell and module capacity has not increased in 2017 as the company keeps tight control on spending to return to sustainable profitability. However, with Hanwha Q CELLS Korea expansions in 2017, the group will have access to 8GW of cell and module capacity starting in 2018, up from 6.4GW at the end of the third quarter of 2017.

Hanwha Q CELLS recently reiterated that it expected module shipments in 2017 to be in the range of 5.5GW to 5.7GW.

GCL System Integrated Technology (GCL-SI)

SMSL member GCL System Integrated Technology (GCL-SI) reported it had ramped its solar cell and module assembly JV plant in Vietnam to around 800MW in the third quarter of 2017.

Critical to the market, the solar cell capacity ramp has been PERC (Passivated Emitter Rear Cell) technology with the flexibility to produce P-type multi and P-type mono cells for the residential, commercial and utility-scale markets.

The company said that its total solar cell capacity would reach 2GW by the end of 2017, which would be completely PERC-based technology based. Currently, around one third of production is P-type multi using ‘Black Silicon’ texturing after wafers (S2 size) are cut with diamond wire. Around a third of production is P-type mono PERC, while a further third of production is flexible to customer demand.

LONGi Group

SMSL member LONGi Group, which is leading the wafer transition to monocrystalline high efficiency wafers, cells and modules has actually increased the pace of some of its previously announced plans for 2017.

At the beginning of the year its capacity for wafers had reached 7.5GW and would reach 12GW by the end of 2017. In the third quarter of 2017, LONGi surpassed the 12GW mark and was planning to add further capacity to meet continued strong demand.

LONGi still expects to meet expansion goals of 5GW for solar cells and 6.5GW for modules by the end of the year. However, it does not plan to provide updated plans until issuing its 2017 Annual Report.

Conclusion

Despite the slowdown in new plans in the quarter, execution on existing plans has been a key theme throughout the year, notably for China-based firms and the majority of SMSL members. Having continued to gain market share in 2017, SMSL members are all expected to announce record annual module shipments in 2017.

Overall, expansion plans simply collapsed in Q3, hardly surprising due to significant level of new plans announced in the first half of the year and increased concerns over the potential imposition of restrictive trade practices in the US and India.